HUD clarifies flat-fee disclosure

Brokers can combine commission, flat fee on HUD-1

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Real estate brokerages may collect both percentage-based commissions and flat fees, disclosing the combined charges on a single line of the HUD-1 settlement statement, as long as the charges are spelled out in the real estate broker’s listing agreement or buyer’s broker agreement.

The U.S. Department of Housing and Urban Development’s top lawyer, Helen Kanovsky, detailed procedures for disclosing real estate broker and agent commission fees in a Jan. 22 letter to Jay Varon, a Washington, D.C.-based attorney who represents real estate brokerages.

HUD, in rolling out new standardized disclosure forms under the Real Estate Settlement Procedures Act (RESPA) last year, "probably wasn’t as explicit as it could have been in saying there’s nothing wrong with charging a flat-fee component as well as a (percentage-based) commission," Varon said. "Now there is no doubt that it can be done."